NatWest and Standard Chartered declare boost to investor payouts

Two British banking giants have announced bumper shareholder rewards after interest rate rises helped their profits to exceed forecasts.

NatWest Group has declared a special dividend totalling £1.75billion, alongside a 3.5p per share interim dividend, as it reported operating pre-tax earnings jumped by around £300million to £2.6billion in the first half of the year.

At the same time, Standard Chartered said investors would benefit from a share buyback programme totalling $500million and a higher ordinary dividend of 4 cents per share, worth around $119million overall.

Rewards: Standard Chartered and NatWest Group have both announced dividend hikes

The London-listed multinational reported half-year profits increased by 8 per cent to $2.1billion, thanks to a record performance by its financial markets division and sizeable growth in Europe and the Americas.

Both banks achieved double-digit percentage growth in interest income as central banks put up base rates in response to soaring inflation, primarily resulting from supply chain bottlenecks and surging energy costs.

Standard Chartered saw net interest revenue grow by 12 per cent on a constant currency basis, while NatWest attained a corresponding 15 per cent gain, reflecting the Bank of England’s rate hikes.

Britain’s central bank has raised interest rates on five consecutive occasions since last December after keeping them at an all-time low of 0.1 per cent for much of the Covid-19 pandemic.

NatWest’s income was also lifted by greater mortgage lending, even as housing affordability in the UK continued to worsen and activity levels in the property market have shown signs of slowing.

Its retail banking arm gave out £1.4billion in ‘green mortgages’, which give customers mortgages with lower interest rates if they buy energy-efficient homes.

Rate rises: The Bank of England has raised interest rates on five consecutive occasions since last December after keeping them at an all-time low of 0.1 per cent since early 2020

AJ Bell investment director Russ Mould remarked: ‘In a mixed UK bank reporting season so far, there’s no question who is getting the gold star.

“NatWest has knocked it out of the park with its latest results. It’s hard to see what more it could have done to impress the market.

“Profit ahead of expectations: check. Big shareholder returns: check. Raised guidance: check. It all adds up to suggest that rising rates are helping to boost the profitability of the group.’

NatWest Group shares climbed 7.7 per cent to 247.8p during the mid-morning on Friday, meaning their value had doubled in the past two years.

Standard Chartered shares also grew steadily this morning, rising by 2.5 per cent to 581.2p, following the publication of its half-year results.

The FTSE 100 group benefited from significant market volatility, yet its performance was tempered by a decline in profits from its Asian operations, where it derives most of its business.

It incurred major credit impairment charges deriving from the downturn in the Chinese commercial real estate sector and the economic crisis afflicting Sri Lanka.

Tough coronavirus restrictions in markets like China and Hong Kong also negatively impacted revenues and earnings in its wealth management arm.